Deck 15: Management Accounting and Cost Concepts

Question 1

Which is usually conducted by executive level management?

A) Evaluating
B) Strategic planning
C) Operational budgeting
D) Controlling

Answer 1

B

Question 2

Production prioritizing is:

A) The continual evaluation of the profitability of the various product lines and divisions.
B) The systematic planning for long-term investments in operating assets.
C) Broad, long-range planning.
D) Planning decisions regarding current operations and those of the immediate future.

Answer 2

A

Question 3

The first step in management planning is:

A) Defining the problem
B) Identifying reasonable alternative courses of action
C) Evaluating the alternatives
D) Choosing and implementing the best alternative

Answer 3

A

Question 4

Which of the following is a short-run planning decision?

A) Defining the organization's mission
B) Purchasing an industrial printing press
C) Performing a strategic market analysis
D) Preparing operational budgets

Question 5

Which of the following is NOT a fundamental characteristic of management accounting as compared to financial accounting?

A) Evolves from the best practices of companies
B) Results in only financial data
C) Exists to serve the competitive needs of organizations
D) Results in both financial and nonfinancial information

Question 6

Capital budgeting is:

A) The continual evaluation of the profitability of the various product lines and divisions.
B) The systematic planning for long-term investments in operating assets.
C) Broad, long-range planning.
D) Planning decisions regarding current operations and those of the immediate future.

Question 7

Providing information for planning, controlling, and evaluating is a function of:

A) Management accounting
B) Financial accounting
C) Governmental accounting
D) Tax accounting

Question 8

Good management accounting is motivated by:

A) Government regulators
B) Accounting rules
C) Management's desire to improve
D) All of these are correct

Question 9

The aspect of management accounting that deals with such issues as what additional major resources (e.g., plant and equipment) are needed to meet a company's long-run goals is called:

A) Capital budgeting
B) Production prioritizing
C) Operational budgeting
D) Strategic planning

Question 10

Determining the best use of financial resources is an aspect of:

A) Capital budgeting
B) Strategic planning
C) Production prioritizing
D) Operational budgeting

Question 11

The primary internal users of accounting information are:

A) Investors
B) Creditors
C) Analysts
D) Managers

Question 12

The process of making decisions about future operations is called:

A) Controlling
B) Planning
C) Evaluating performance
D) Implementing

Question 13

With regard to a particular company, which of the following groups generally has the widest variety of decisions to make?

A) Managers
B) Creditors
C) Investors
D) Regulators

Question 14

Which of the following is a fundamental characteristic of management accounting as compared to financial accounting?

A) Uses only financial data
B) Satisfies a competitive need
C) Uses generally accepted accounting principles
D) Is governed by regulatory agencies

Question 15

Strategic planning is:

A) The continual evaluation of the profitability of the various product lines and divisions.
B) The systematic planning for long-term investments in operating assets.
C) Broad, long-range planning.
D) Planning decisions regarding current operations and those of the immediate future.

Question 16

Accounting information helps management to:

A) Decide what prices to charge
B) Decide how to market products
C) Decide how to control operations
D) Make all of these decisions

Question 17

Which of the following principles are the LEAST uniform and are NOT mandatory?

A) Financial reporting principles
B) Management accounting principles
C) Tax reporting principles
D) All of these are equally uniform and mandatory

Question 18

Which of the following is NOT a function of management?

A) Planning
B) Controlling
C) Analyzing
D) Regulating

Question 19

Management accounting is established by:

A) Individual companies
B) FASB
C) SEC
D) GAAP

Question 20

Operational budgeting is:

A) The continual evaluation of the profitability of the various product lines and divisions.
B) The systematic planning for long-term investments in operating assets.
C) Broad, long-range planning.
D) Planning decisions regarding current operations and those of the immediate future.

Question 21

All of the following are involved in the management function of planning EXCEPT:

A) Operational budgeting
B) Capital budgeting
C) Strategic planning
D) Variance computation

Question 22

Zodiac Company's total costs are the same at all levels of activity. The company's cost structure must have all:

A) Fixed costs
B) Variable costs
C) Product costs
D) Sunk costs

Question 23

The process of control involves:

A) Preparing capital budgets
B) Identifying problems
C) Tracking actual results
D) Preparing operational budgets

Question 24

Variances which result from a comparison of actual performance against expected results would be used in which management function?

A) Planning
B) Controlling
C) Evaluating
D) None of these are correct

Question 25

Which of the following is NOT a fixed cost?

A) Property taxes
B) Direct labor
C) Executives' salaries
D) Depreciation

Question 26

The cost of milk used to manufacture ice cream would most likely be classified as a(n):

A) Variable cost
B) Indirect cost
C) Sunk cost
D) Fixed cost

Question 27

If a cost increases as the sales volume increases, the cost is a:

A) Direct cost
B) Sunk cost
C) Variable cost
D) Fixed cost

Question 28

Short-run planning involves which one of the following processes?

A) Preparing capital budgets
B) Tracking actual performance
C) Preparing operational budgets
D) Comparing actual results with established standards

Question 29

Advertising, insurance, and executives' salaries are all examples of:

A) Variable costs
B) Fixed costs
C) Direct labor
D) Direct material

Question 30

The control of operations involves all the following procedures EXCEPT:

A) Tracking actual performance
B) Analyzing results
C) Creating performance measures
D) Establishing expectations

Question 31

Which of the following would most likely be a variable cost?

A) Direct materials
B) Direct labor
C) Sales commissions
D) All of these are correct

Question 32

Which management function implements management plans and identifies how plans compare with actual performance?

A) Controlling
B) Evaluating
C) Planning
D) Tracking

Question 33

Assume that Rose Company sold 15,000 units to break even this period. Each unit sells for $100. The variable cost per unit is $65. What were fixed costs for the period?

A) $975,000
B) $525,000
C) $1,500,000
D) $300,000

Question 34

Which management function analyzes results, rewards performance and identifies problems?

A) Controlling
B) Evaluating
C) Tracking
D) Planning

Question 35

Which of the following would most likely be considered a variable cost?

A) Property taxes
B) Rent
C) Bolts of cloth in a clothing factory
D) Depreciation

Question 36

Long-run planning involves which one of the following processes?

A) Capital budgeting
B) Production prioritizing
C) Operational budgeting
D) Variance comparison

Question 37

Assume that Lily Company has total fixed costs of $48,000 for the period. Each unit sells for $40. The variable cost per unit is $24. How many units must be sold to break even?

A) 1,200
B) 2,000
C) 3,000
D) 4,000

Question 38

Which of the following reveals how profitability is affected by changes in revenues, costs and activity levels?

A) Operational budgeting
B) Return on investment
C) C-V-P analysis
D) Production prioritizing

Question 39

If total cost stays the same, even though the production level has risen, the cost is a(n):

A) Indirect cost
B) Fixed cost
C) Variable cost
D) Out-of-pocket cost

Question 40

Identifying problems and opportunities is a product of which process?

A) Evaluating
B) Long-term planning
C) Short-term planning
D) Controlling

Question 41

In a manufacturing company, indirect labor is usually classified as a(n):

A) Period cost
B) Product cost
C) Opportunity cost
D) Selling cost

Question 42

Which is NOT a period cost of operating a retail store?

A) Cost of merchandise sold
B) Store manager's salary
C) Store rent
D) Corporate computer cost

Question 43

During the quarter, Iris Company sold 100,000 units at $5 per unit to break even. Iris had $150,000 in fixed costs. What was variable cost per unit for the quarter?

A) $3.50
B) $1.50
C) $4.00
D) $3.00

Question 44

Materials used in production are classified as "direct materials" if they are:

A) Controllable by managers
B) Traceable to specific products
C) Fixed costs
D) Not a significant part of production

Question 45

Manufacturing costs are also considered:

A) Selling costs
B) Fixed costs
C) Product costs
D) Period costs

Question 46

Which of the following would NOT be considered a manufacturing cost?

A) Tires for an automobile manufacturer
B) Milk for an ice cream maker
C) Sales commissions for an automobile manufacturer
D) Property taxes on the factory for an ice cream maker

Question 47

Miscellaneous materials used by sales managers should be accounted for as:

A) Direct materials
B) Indirect materials
C) Manufacturing overhead
D) Selling expense

Question 48

Utility expense in a merchandising company would be considered a(n):

A) Product cost
B) Period cost
C) Manufacturing cost
D) Indirect cost

Question 49

Product costs in a manufacturing firm would NOT include:

A) Direct materials
B) Manufacturing overhead
C) Administrative costs
D) Indirect labor

Question 50

Which of the following is NOT true of period costs?

A) They cannot be assigned to a product
B) The most common are selling and administrative costs
C) They are recognized as an expense
D) They may appear on the balance sheet as inventory

Question 51

The product costs of a software development company would NOT include:

A) Computer lease
B) Salary of the CEO
C) Supplies used by programmers
D) Computer programmers' salaries

Question 52

Which of the following types of costs are most likely to be classified as period costs?

A) Administrative costs
B) Property taxes on factory
C) Direct materials used in production
D) Indirect materials

Question 53

Which of the following would NOT usually be considered a product cost of a manufacturing company?

A) Property taxes on factory building
B) Direct materials
C) Indirect labor
D) Advertising

Question 54

Which of the following has a direct materials inventory?

A) Merchandising company
B) Service company
C) Manufacturing company
D) None of these are correct

Question 55

Which of the following would NOT be included in manufacturing overhead?

A) Indirect materials
B) Factory utilities
C) Factory fire insurance
D) Direct labor

Question 56

Direct labor is most often considered which of the following?

A) Manufacturing overhead
B) Fixed cost
C) Indirect cost
D) Product cost

Question 57

Violet Company typically has $360,000 of fixed costs and $25 of variable costs per unit. Violet plans to sell 8,000 units this period. In order for Violet to break-even, what price should Violet charge per unit?

A) $70
B) $25
C) $45
D) $20

Question 58

Glue used in the manufacture of chairs would most likely be classified as:

A) Direct materials
B) Manufacturing overhead
C) Period cost
D) Direct labor

Question 59

Which of the following has no inventories?

A) Merchandising company
B) Manufacturing company
C) Service company
D) None of these are correct

Question 60

A nonmanufacturing cost is usually classified as:

A) A product cost
B) Direct materials
C) A period cost
D) Manufacturing overhead

Question 61

You are thinking about taking a trip to Asia. The cost of the airplane ticket you have yet to purchase is a(n):

A) Sunk cost
B) Direct cost
C) Differential cost
D) Opportunity cost

Question 62

Costs that are directly traceable to a unit of business or segment being analyzed are called:

A) Direct costs
B) Sunk costs
C) Variable costs
D) Overhead costs

Question 63

Cherry Company manufactures electronic yard tools. Costs for May were direct labor, $84,000; indirect labor, $51,000; direct materials, $69,000; indirect materials, $9,000; factory utilities, $6,900; and insurance on manufacturing equipment, $2,100. Cherry Company's total manufacturing costs for May are:

A) $135,000
B) $69,000
C) $138,000
D) $222,000

Question 64

The cost of milk for an ice cream manufacturer would be considered all of the following EXCEPT:

A) Product cost
B) Manufacturing cost
C) Variable cost
D) Indirect cost

Question 65

The most important costs to consider when making a decision involving future action are:

A) Sunk costs
B) Opportunity costs
C) Out-of-pocket costs
D) Differential costs

Question 66

Mackie Co. manufactures hunting clothing. The standard variable costs to produce one batch of the Big Mac vests are as follows: direct material average cost is $6 per yard; average yards per batch is 20; direct labor average rate per hour is $12; average hours per batch is 4; variable overhead average rate per hour is $8; average hours per batch is 4. The standard monthly fixed costs are as follows: manufacturing overhead is $3,200; selling and administrative costs are $1,900. Mackie Co. produces 100 batches per month. (Ten vests are produced in each batch.) What is the manufacturing cost per vest?

A) $5.10
B) $12.00
C) $23.20
D) $25.10

Question 67

Costs incurred for the benefit of more than one segment of the business are called:

A) Direct costs
B) Opportunity costs
C) Common costs
D) Variable costs

Question 68

The only kind of costs that do NOT involve any outlay of cash are:

A) Opportunity costs
B) Sunk costs
C) Indirect costs
D) Differential costs

Question 69

Another name for joint costs is:

A) Direct costs
B) Indirect costs
C) Variable costs
D) Fixed costs

Question 70

Cherry Company manufactures electronic yard tools. Costs for May were direct labor, $84,000; indirect labor, $51,000; direct materials, $69,000; indirect materials, $9,000; factory utilities, $6,900; and insurance on manufacturing equipment, $2,100. Cherry Company's manufacturing overhead for May is:

A) $18,000
B) $69,000
C) $138,000
D) $222,000

Question 71

The Zig-Zag Company manufactures zippers for many clothing manufacturers. Costs for the year were direct materials, $5,000; indirect materials, $1,600; direct labor, $12,000; and indirect labor, $4,000. Additional expenses for the year were factory utilities $3,500; depreciation of factory equipment, $1,300; advertising expense, $900; delivery expense on sales to customers, $1,700; and property taxes on factory buildings, $5,200. Which amount is total manufacturing costs for the year?

A) $22,000
B) $17,000
C) $15,600
D) $32,600

Question 72

You want to go skiing for the day. The cost of the lift ticket would be considered a(n):

A) Sunk cost
B) Out-of-pocket cost
C) Opportunity cost
D) Indirect cost

Question 73

You want to go skiing for the day. However, you realize you are scheduled to work. If you call in sick and do not go to work, the wages you will not earn (assuming you are an hourly employee) are considered a(n):

A) Differential cost
B) Sunk cost
C) Out-of-pocket cost
D) Opportunity cost

Question 74

The Zig-Zag Company manufactures zippers for many clothing manufacturers. Costs for the year were direct materials, $5,000; indirect materials, $1,600; direct labor, $12,000; and indirect labor, $4,000. Additional expenses for the year were factory utilities $3,500; depreciation of factory equipment, $1,300; advertising expense, $900; delivery expense on sales to customers, $1,700; and property taxes on factory buildings, $5,200. Which amount is the company's manufacturing overhead for the year?

A) $10,000
B) $11,600
C) $15,600
D) $17,300

Question 75

Costs that are NOT classified as direct materials or direct labor but are essential to the production of goods and services are:

A) Differential costs
B) Manufacturing overhead costs
C) Fixed costs
D) Sunk costs

Question 76

In constructing a custom cabinet, an indirect material would be:

A) Wood
B) Screws
C) Brass handles
D) Hinges

Question 77

Which of the following types of costs would be allocated among segments rather than directly attributable to a segment?

A) Variable costs
B) Indirect costs
C) Fixed costs
D) Sunk costs

Question 78

Future costs that change as a result of a decision are:

A) Direct costs
B) Differential costs
C) Out-of-pocket costs
D) Common costs

Question 79

Rhododendron Company offers yard maintenance services for residential clients. Costs for the year were direct labor, $80,000 and indirect labor, $5,000. Additional expenses for the year were supplies $6,000; depreciation of lawn maintenance equipment, $1,000; advertising expense, $500; receptionist payroll, $13,000 and fuel, $2,500. Which amount is Rhododendron's total service costs?

A) $14,500
B) $80,000
C) $94,500
D) $11,000

Question 80

Janet's Jewelry makes sterling silver jewelry. One of the most popular rings, the Love Knot, is produced in batches of 10. The standard variable costs to produce one batch are as follows: direct material average cost is $13 per ounce; average ounces per batch is 20; direct labor average rate per hour is $22; average hours per batch is 10; variable overhead average rate per hour is $10; average hours per batch is 10. The standard monthly fixed costs are as follows: fixed manufacturing overhead is $1,400; selling and administrative costs are $1,500. Janet's Jewelry produces 10 batches per month. What is the manufacturing cost per batch?

A) $58
B) $72
C) $720
D) $870